Thursday , May 13 2021

Why Tweets from Trump move oil prices?




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President Donald Trump waves under the umbrella when he returns to the White House on Sunday, April 28, 2019, in Washington, after attending an evening rally in Wisconsin. (AP / Jacquelyn Martin photo)

The Associated Press reported

On Friday it seemed one of the biggest falls of oil in recent years, with WTI falling $ 2.41 / barrel. Many attributed the shift to the chirping of President Trump because he spoke with Saudi Arabia and others about raising production to lower prices, and his remark that he "called OPEC" and ordered them to lower oil prices.Unfortunately, there is little evidence that he accepted Any action other than his comments, something that the public is using until now, then some are puzzled by the sharp price move.

When people ask how the price of oil is determined, I often suggest not studying microeconomics, but watching the big movie, "Places of Commerce", which includes the memorable line in question by Eddie Murphy, who tells how futures work, "I get That. & Nbsp; You are a book lover. " The investment banker pushes his brother and says, "I told you he would understand." Needless to say, it did not take to learn.

Instead, the display of trading floor with brokers shout to buy and sell react as a herd of rumors news captures the way prices are set in the very short term, seconds, minutes and hours. & Nbsp; No one on the trading floor does not think about the marginal cost of production, OPEC's long-term cohesion, or pressure of new technologies like electric vehicles.

The immediate response to any piece of news or rumor is based mainly on expectations of how other traders will react. & Nbsp; For example, if the GDP estimate was announced higher than expected, traders know that the standard interpretation is bullish, and that even those who do not think it means higher demand (this is a lagged indicator after all) recognize that others will treat it as such and return prices.

But such moves are often temporary, since markets (read "traders") digest the news in a more complete form and read different interpretations of the data. & Nbsp; Therefore, tomorrow's trading may see a reversal or a reversal from the original move – especially if there is no other news to drive the market.

This explains why news or events that may seem irrelevant to the global oil market can move prices. & Nbsp; Violence in the West Bank is not expected to change the number of oil barrels in the market, but traders tend to react to violence in the Middle East wherever it occurs. Similarly, Iran's threats to close the Strait of Hormuz (or, more accurately, threats by an Iranian official) may be replicated as empty memories, just like President Trump's tweets often, but it does not matter – in the very short term.

Friday's move seems to be much more than just the relationship between the US President and OPEC or OPEC, because when the market moves steadily in one direction for days, there are those who are waiting to take profits from their positions. One of the most important factors in momentum trading Is the turning point, even if the momentum seems to be based on fundamentals not psychology. News about Iranian sanctions, fighting in Libya, quality problems of Russian oil and more would raise prices all week, but on Friday, there was only a few downback downgrades of Supply losses are estimated, for example – but the bulls made good money and were looking to take profits before others pushed the price down.

Thus, President Trump's words were only a factor in the bulls' operation. With the fall in prices, there was probably a lot of "long cover", that is, traders with long positions that need to close, by selling into the market, which caused the price down price that much sharper. The closed weekend market also encourages Friday traders to get out of their positions to avoid new losses and should be negative.

Overall, the Friday sale shows that the market was a bit overbought, but while the media (and bloggers) must necessarily explain what happened in real time, it is likely that traders will digest the developments last weekend and come to market on Monday with a new perspective. & nbsp; Any rebound may be expected in Monday's prices, but can easily be overwhelmed by news, data, or rumors.

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President Donald Trump waves under the umbrella when he returns to the White House on Sunday, April 28, 2019, in Washington, after attending an evening rally in Wisconsin. (AP / Jacquelyn Martin photo)

The Associated Press reported

On Friday it seemed one of the biggest falls in the price of oil in recent years, with WTI falling $ 2.41 / barrel. Many attributed the shift to the chirping of President Trump because he spoke with Saudi Arabia and others about raising production to lower prices, and his remark that he "called OPEC" and ordered them to lower oil prices.Unfortunately, there is little evidence that he accepted Any action other than his comments, something that the public is using until now, then some are puzzled by the sharp price move.

When people ask how the price of oil is determined, I often suggest not studying microeconomics, but watching the big movie, "Places of Commerce", which includes the memorable line in question by Eddie Murphy, who tells how futures work, "I get You're looking for books. " The investment banker pushes his brother and says, "I told you he would understand." Needless to say, this is not the lesson to be learned.

Instead, the display of trading floor with brokers shout to buy and sell react like a herd of rumors news captures the way prices are set in the very short term, seconds, minutes and hours. No one on the trading floor does not think about the marginal cost of production, OPEC's long-term cohesion, or pressure of new technologies like electric vehicles.

The immediate response to any piece of news or rumor is based primarily on the expectations of how other traders will react. For example, if the GDP estimate was announced higher than expected, traders know that the standard interpretation is bullish, and that even those who do not think it means higher demand (this is a lagged indicator after all) recognize that others will treat it as such and return prices.

But such moves are often temporary, as markets (read "traders") digest the news more fully and read different interpretations of the data. Therefore, tomorrow's trading may see a reversal or a reversal from the original move – especially if there is no other news to drive the market.

This explains why news or events that may seem irrelevant to the world oil market can move prices. Violence in the West Bank is not expected to change the number of oil barrels in the market, but traders tend to react to violence in the Middle East wherever it is. Similarly, Iran's threats to close the Strait of Hormuz (or, more accurately, threats by an Iranian official) may be replicated as empty memories, just like President Trump's tweets often, but it does not matter – in the very short term.

Friday's move seems to be much more than just the relationship between the US President and OPEC or OPEC, because when the market moves steadily in one direction for days, there are those who are waiting to take profits from their positions.One of the most important factors in momentum trading is the turning point , Even if the momentum seems to be based on fundamentals not psychology News on Iranian sanctions, fighting in Libya, quality problems of Russian oil and more would raise prices all week, but on Friday, there was not only some downback downgrading of estimated supply losses, For example – but the bulls made good money and were looking to take profits before others pushed the price down.

Thus, President Trump's words were simply a factor in the bulls' operation. With the fall in prices, there was probably a lot of "long cover", that is, traders with long positions that need to close, by selling into the market, which caused the price down price that much sharper. The closed weekend market also encourages Friday traders to get out of their positions to avoid new losses and should be negative.

Overall, the Friday sale shows that the market was a bit overbought, but while the media (and bloggers) must necessarily explain what happened in real time, it is likely that traders will digest the developments last weekend and come to market on Monday with a new perspective. Any rebound may be expected in Monday's prices, but can easily be overwhelmed by news, data, or rumors.


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